The minutes also noted rising iron ore prices and strong increases in other resources exports, especially coal. It described existing monetary policy settings as accommodative and said last year’s rate cuts were working through the economy.

AFR
AFR

The RBA’s growth forecasts are based on a persistently high level of the Australian dollar.

National Australia Bank economist Robert Henderson said that would have to change. “Our analysis suggests that more rate cuts will be required, as well as a pull-back in the Australian dollar, to see growth move back to trend in 2014," he said.

If the dollar is to fall, it will do so amid the currency wars that HSBC says are intensifying with more participants and policy tools on the battleground.

JPMorgan notes that since 2010, the relationship between interest rates and exchange rates has changed.

Meanwhile, ANZ Banking Group currency strategists see room for a bounce in the Australian dollar against the New Zealand dollar after it hit 30-month lows of $NZ1.22 this week.

The Kiwi trade-weighted index has hit a record high and rates expectations in the two countries are going in opposite directions.

“We expect monetary policy expectations to move in opposite directions again as the Australian market prices in a less aggressive easing profile and the NZ market prices out rate hikes," wrote David Croy and Andrew Salter in a note to clients.